Claire's up despite numbers; Delphi DIP inches higher; GM softens; Myers LBO canceled

By Sara Rosenberg

New York, April 4 - Claire's Stores Inc.'s term loan was stronger on Friday as investors basically ignored the bad earnings results and pushed the paper up with the rest of the cash market, Delphi Corp.'s debtor-in-possession second-lien term loan moved closer to par and General Motors Corp.'s term loan came under some pressure.

In other news, Myers Industries Inc.'s proposed buyout by GS Capital Partners was terminated, taking another deal off the loan overhang calendar, and price talk on Vistar Corp.'s asset-based revolver surfaced being that the syndication process has begun.

Claire's Stores term loan traded better during Friday's market hours even though the company reported "terrible" financial results for the fourth quarter and full fiscal year, according to traders.

However, these traders went on to say that the earnings, although bad, were in line with what people had already been expecting.

The term loan was quoted at 75¼ bid, 76¼ offered late in the day, compared to Thursday's levels of 74¼ bid, 75¼ offered, traders said. One trader said that he saw the paper trade as high as near 76 in the mid-morning. Another trader said that he was quoting the paper at 73¼ bid, 75¼ offered on the open because of the poor earnings, but it traded up from there with the rest of the market.

The cash market in general was up about a quarter to a half a point on Friday and LCDX 9 was quoted at 94.90 bid, 95.05 offered, up from 94.45 bid, 94.65 offered, traders remarked.

One trader explained that the cash market was better because amortization with quarter-end is giving people more cash to put to work and there's less pressure as people have been "chipping away" at the loan overhang.

Getting back to Claire's, for the fourth quarter, net sales were $447.4 million, a 5.3% decrease from the fourth quarter of fiscal 2007, adjusted EBITDA was $114.7 million, compared to $135.6 million last year, and cash provided by operating activities was $21.9 million, compared with cash provided by operating activities of $125.1 million last year.

For fiscal 2008, net sales were $1.5108 billion, an increase of 2% from $1.481 billion last year, and adjusted EBITDA was $300.2 million, compared to $332.2 million last year.

"Our fiscal 2008 results reflect the difficult economic environment giving rise to a consumer pullback that is impacting retailers around the globe. Despite the shortfall in anticipated sales, the discipline with which we operated the business enabled us to improve merchandise margins and keep inventories fresh and forward looking," said Gene Kahn, chief executive officer, in a news release.

Claire's is a Pembroke Pines, Fla.-based specialty retailer of value-priced jewelry and accessories for girls and young women.

Delphi DIP up, GM down

There was a lot of buzz surrounding Delphi and General Motors on Friday after Appaloosa Management LP terminated its agreement to invest $2.55 billion in Delphi. And, in the wake of the news, Delphi's DIP second-lien term loan traded higher, while General Motors's term loan traded lower, according to traders.

Delphi's DIP second-lien term loan was quoted at 98 3/8 bid, 99 3/8 offered, up from 98 1/8 bid, 99 1/8 offered, traders said.

Delphi's exit facility first-lien term loan did not really trade in the Street on Friday because of all the uncertainty surrounding it in terms of whether it will go through or not; however, there were some levels being floated around by market players, with one quoting the deal at 95 bid, 96 offered and another quoting it at 94½ bid, 95 offered. On Thursday, the loan went out at 94 bid, 95 offered.

"A lot of people are still thinking that this thing might go through," one trader said about the exit facility.

"Some people think all the tickets are going to get ripped up," another trader said about the exit loan, adding that because of the ambiguity, "people refocused on the DIP" on Friday. "Some people are banking on the fact that [the DIP] will be taken out. If the deal goes through, depending on when you think it will happen, [the DIP] is kind of cheap."

Meanwhile, General Motors's term loan softened on the day, with levels quoted at 89½ bid, 90½ offered, compared to 90 bid, 91 offered on Thursday, traders continued.

The traders explained that investors are trying to figure out what type of action, if any, General Motors will take to help Delphi emerge from Chapter 11.

"Question of will they get more debt, will they buy Delphi, will they just leave it alone. People are trying to figure out what to do with this," one trader remarked.

On Friday morning, Appaloosa revealed in an SC 13D/A filed with the Securities and Exchange Commission that it was terminating its equity purchase agreement because it believes that Delphi breached the agreement in a number of ways, including with respect to the exit financing and investment agreements with General Motors.

In response to Appaloosa's decision, Delphi's vice president and chief restructuring officer, John Sheehan, issued a statement saying: "Our formal closing process commenced today, and all of the other required parties for a successful closing and emergence from Chapter 11 - including representatives of our new exit lenders, General Motors Corp. and our Joint Statutory Committees - were present and prepared to move forward this morning.

"We are extremely disappointed that our plan investors have taken the position that they are not obligated to fund their plan investment commitments to Delphi and instead have chosen to walk away from the company and its stakeholders. We are prepared to pursue actions that are in the best interests of Delphi and its stakeholders.

"These actions will be overseen by a committee of our Board of Directors, and will not impact the successful operation of the company. We are very appreciative of the strong financial support from our exit financing lenders and GM, and we look forward to continuing to work with them and our other stakeholders as we move forward with our goal of emerging from Chapter 11 as soon as practicable," Sheehan added.

Delphi is a Troy, Mich.-based automotive electronics manufacturer. General Motors is a Detroit-based automaker.

Myers buyout terminated

Moving to new deal happenings, Myers Industries received notice that GS Capital Partners does not plan on proceeding with the proposed leveraged buyout of the company for $22.50 per share in cash, and as a result, the acquisition agreement that was reached on April 24, 2007 was mutually ended, according to a news release.

As part of the buyout, Myers was planning on getting a new $685 million senior secured credit facility (Ba3/B+) and a $265 million offering of 10-year senior subordinated notes (B3/CCC+).

The credit facility, which had been launched with a bank meeting on July 19, 2007, but then postponed on July 31 due to market conditions, consisted of a $535 million seven-year term loan and a $150 million six-year revolver. Price talk at launch had been Libor plus 250 bps.

Then, in December the company announced that it received an extension of its debt financing commitments for the buyout and extended the closing date to April 30 from Dec. 15.

Goldman Sachs and Key Bank were acting as the lead banks on the credit facility.

Myers is an Akron, Ohio, manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets.

Vistar price talk

Vistar came out with price talk of Libor plus 225 bps on its $1.1 billion asset-based revolver now that the deal has been launched to investors, according to a market source.

Wachovia, Credit Suisse and GE Capital are the lead banks on the deal. Wachovia committed 60% of the facility, and Credit Suisse and GE committed 20% each.

Proceeds will be used to help fund the acquisition of Performance Food Group Co. in a transaction valued at $1.3 billion. Performance Food shareholders will receive $34.50 in cash per share.

Under the commitment letter, the company could have obtained an $825 million senior secured credit facility instead of the asset-based revolver, but only if availability under the revolver would have been less than $165 million after giving effect to extensions of credit on the closing date.

The $825 million credit facility would have consisted of a $100 million revolver, a $75 million synthetic letter-of-credit facility and a $650 million term loan.

Other financing for the acquisition will come from $759.5 million in cash equity contributions and $300 million of senior unsecured mezzanine notes.

Wachovia Investment Holdings, DLJ Investment Partners, IP III Plan Investors, Blackstone Group and Wellspring Capital Management have committed to purchase the senior notes.

Vistar, a portfolio company of Blackstone and Wellspring, is a Denver-based foodservice distributor. Performance Food is a Richmond, Va.-based restaurant food distributor.

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